A big return for a research buck

A study shows the Missouri Agricultural Experiment Station beats other states and outpaces the stock market in ROI

An almost 40 percent return on investment today would make a stock broker’s heart swoon. The Missouri Agricultural Experiment Station has been delivering those kinds of returns to the state for more than four decades, a new study has found.Ag Experiment Station

The recently published research paper, Rates of Return of Public Agricultural Research, showed that every dollar invested in Missouri AES research produced 37 percent more in private-sector agricultural productivity and social benefits. On average, other states saw a 29 percent rate of return (ROI). Missouri’s ranking was best in the lower 48 states, according to the report.

The research was conducted by Lilyan E. Fulginiti, professor of agricultural economics at the University of Nebraska-Lincoln, and Alejandro Plastina, an economist at the International Cotton Advisory Committee.

The study measured the additional amount of crops, livestock and agricultural economic activity directly created by research by agricultural experiment stations, as well as infrastructure enhancements. The research looked at data from 1949-1991, the longest uninterrupted period of time that could be studied.

“This means that for every dollar invested in Missouri’s Agricultural Experiment Station, you got $1.37 back,” Fulginiti said. “This beats the nine percent and 12 percent average returns of the S&P 500 and NASDAQ composite indexes during the same period. It would have been better to invest in agricultural research and development in Missouri than putting that money in the stock market.”

One example of how the AES impacted productivity was Missouri research that developed livestock feeding guidelines, Fulginiti said. These optimized cattle’s weight-gaining processes and reduced time-to-market. Another example was how pest management techniques developed by AES resulted in lower insecticide use and, therefore, lower insecticide costs.

“This means that new technologies developed in Missouri are very, very good for Missouri producers as they allow reductions in cost, or increases in productivity in the state—much more than other states,” Fulginiti said. This was the first study to provide such assessment at the state level, she continued.

Each state has an agricultural experiment station, usually associated with a land-grant university. These stations conduct investigations to solve problems and suggest improvements in the food and agriculture industry. Experiment station scientists work with farmers, ranchers, suppliers, processors and others involved in food production and agriculture. AES funding comes from state and federal sources, as well as grants, contracts and sale of products.

The Missouri AES, organized in 1888, is a part of the University of Missouri College of Agriculture, Food and Natural Resources. It specializes in enhancing the productivity in numerous farm crops such as soybeans, beef and dairy production, forestry, and natural resource development. The Missouri AES operates a system of farms, centers and forests around the state to meet the regional research and demonstration needs of agricultural producers and natural resource managers.

“I was very excited to read this study,” said Marc Linit, CAFNR associate dean and associate director of the Missouri Agricultural Experiment Station. “I have always thought that that we provided excellent research and demonstration projects to support the agricultural sector in the state of Missouri. This study shows that we have been excellent stewards of the investment made in the AES by the taxpayers of the state.”

Fulginiti is a Professor in the Department of Agricultural Economics at the University of Nebraska, Lincoln. Her research interests include agricultural productivity and policy analysis, interactions of productivity growth with socio-political factors, and international agricultural development. Plastina is an Economist at the International Cotton Advisory Committee. His research interests include productivity analysis, agricultural development, policy analysis and biotechnology.

The return on investment results comes at a time of decreasing financial support from the federal government for research in agriculture. The report stated that in 2008, the USDA cut its research and development expenditures by 16 percent. Research and education activities under the Cooperative State, Research, Education and Extension Service (CSREES) was reduced by 20 percent. Federal science and technology budgets for the Agricultural Research Service and the Forest Research Service have declined, respectively, by 7.5 and 8 percent.

Fulginiti and Plastina are collaborating now with USDA and conducting updated calculations that will also include returns for Extension funding.